India's Five Star completes $195m IPO, GPs make partial exits
Five Star Business Finance, an Indian non-banking financial company (NBFC) that has received several rounds of private funding, gained 3% on debut following an INR 15.9bn (USD 195m) domestic IPO.
The company sold 33.6m shares at INR 474 apiece, according to a filing. Matrix Partners India and TPG Capital were the biggest sellers, netting proceeds of INR 6.83bn and INR 5.69bn, respectively. Norwest Venture Partners received INR 2.94bn and Sequoia Capital India got INR 1.36bn.
The stock opened at INR 449.95 on November 21 but then climbed to INR 539.90 before closing at INR 489.50. It ended November 22 on INR 492.95, giving the company a market capitalisation of approximately INR 144bn.
Five Star’s most recent private round of meaningful size was a USD 234m investment led by KKR and Sequoia in March 2021 at a valuation of USD 1.4bn. KKR participated through its global impact fund. Norwest and TVS Capital re-upped, while Morgan Stanley Private Equity Asia (MSPEA) exited.
The company received around USD 480m across seven rounds, according to AVCJ Research. Matrix was the first investor in 2014 and MSPEA committed USD 17m two years later. A USD 52m round in 2017 saw the arrival of Sequoia and Norwest, while Matrix and MSPEA re-upped. TPG joined them in a USD 100m round in 2018 and provided an additional USD 50m in 2019.
Prior to the IPO, TPG was the largest shareholder with a 21.45% stake. It was followed by Sequoia on 17.9% – held across multiple entities – Matrix on 12.46%, and Norwest on 10.17%. TVS had 1.23%.
Five Star was founded in 1984 with a focus on micro, small, and medium-sized enterprises (MSMEs) and housing loans in lower-tier cities. As of June, it had 311 branches spread across 150 districts, eight states, and one union territory. The states of Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka account for 85% of the branch network. There are more than 6,000 employees.
There were 217,745 live accounts as of March, with disbursements reaching INR 17.6bn over the prior 12 months. Around 63,600 loans were issued; 95% of them fell in the INR 100,000 to INR 1m range. Gross term loans and total assets amounted to INR 50.6bn and INR 63.4bn, respectively.
Revenue for the 12 months ended March was INR 12.5bn, up from INR 10.5bn a year earlier. Over the same period, net profit rose from INR 3.59bn to INR 4.54bn.
"It took 18 months for myself and Matrix to conclude the deal in 2014. I would say every minute of waiting was absolutely worth it. They are not just investors in Five Star, they have stayed the course with me through this journey and I am very grateful for the long association," said D. Lakshmipathy, chairman and managing director of Five Star, in a statement issued by Matrix.
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